Liability arise only when the project is completed unless estimated on reasonable basis periodically

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCHES: “D” New Delhi

BEFORE SHRI AD JAIN, JUDICIAL MEMBER

AND SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER

ITA Nos: 812 & 3619/Del/2011

Assessment Year: - 2004-05 & 2007-08

The Dy.CIT, Circle 4(1)

New Delhi

(Appellant)

Vs.

M/s Lurgi India Co.P.Ltd.

A 24/10, Mohan Co-Operative Area

Mathura Road, New Delhi

PAN: AAACL 4255D

 (Respondent)

Appellant by: Shri DK Mishra, CIT, D.R.

Respondent by: Shri SK Aggarwal, C.A. & Ms.Amisha Singhal, Adv.

O R D E R

PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER

Both these appeals are filed by the Revenue and are directed against separate but identical orders of the ld.CIT(A) dated 15.12.2010 pertaining to the AYs 2004-05 and dt. 20.5.2011 for Assessment Year 2007-08. As the issues arising in both the appeals are common for the sake of convenience, they are heard together and disposed off by way of this common order. The effective ground of appeal for both these AYs is ground no.2 which reads as follows.

“2. On the facts and in the circumstances of the case and in law, the ld.CIT (A) has erred in deleting the addition of Rs.1,12,53,000/- made by the Assessing Officer on account of warranty and other expenses.”

2. We have heard Shri DK Mishra, CIT, D.R. on behalf of the Revenue and Shri Shri SK Aggarwal, C.A. the Ld.Counsel for the assessee. On a careful consideration of the facts and circumstances and on perusal of the material on record, we hold as follows:-

3. The Ld.CIT(A) at para 4 and 5 pages 2 and 3 of his order held as follows.

“4. Ground of appeal No.3: relates to the grievance of the appellant against the action of the Assessing Officer in making an addition of Rs.1,12,53,000/- on account of warranty and other expenses. It was submitted on behalf of the appellant that, the identical addition was made in Assessment Year 2000-01 and the appeal against the same was decided in favour of the appellant company vide order of Commissioner of Income Tax (Appeals)-VII, New Delhi vide her order dt. 18.7.2003 in Appeal no.47/2002-03. The department had preferred an appeal against the order of Commissioner of Income Tax (Appeals)-VII, New Delhi before Hon’ble ITAT, Delhi who vide their order dt. 24.8.2007 dismissed the appeal of the department, thereby confirming the order of Commissioner of Income Tax (Appeals)-VII, New Delhi. The ld.A.R. placed before me the copy of the afore mentioned order of the Tribunal and, therefore prayed that, the addition made for the instant Assessment Year may be deleted in the light of the order of the Hon’ble Tribunal for the Assessment Year 2000-2001. It is also noticed on perusal of the assessment order that the Assessing Officer has made the above addition on the ground that the order of the Hon’ble ITAT for Assessment Year 2000-2001 has not been accepted by the dept. and appeal has been field before the Hon’ble Delhi High Court where the matter is still pending.

4.1. I have considered the submissions made on behalf of the appellant and the facts on record. I have also perused the order of the Tribunal referred to above. It is noticed that the Tribunal confirmed the order of Commissioner of Income Tax (Appeals)-VII, New Delhi who had deleted the identical addition made in the appellant’s own case in Assessment Year 2000- 2001, with the following observations made (Refer para 8.2 of the Tribunal’s order).

‘8.2. We have considered the facts of the case and rival submissions. We are of the view that if any liability is fastened on the assessee even in the case of a completed project, then, such liability accrues or arises on the date when the project is competed. It may be difficult at that point to exactly work out the liability. However, if it can be estimated on a reasonable basis, such estimate will be accrued liability and not a contingent or expected liability. The assessee had estimated its liability in respect of two projects at Rs.13,24,724/- against which the expenditure of Rs.11,67,210/- was incurred within six months from the end of the PY. In these circumstances, the estimation of liability can be termed as reasonable. It was also the case of the Ld.Counsel that the balance amount has been offered for taxation as provision of s.41(1) will become applicable in respect of the balance amount. Subject to verification of the offering of the balance amount for taxation, it is held that the liability was an accrued liability. In case the balance amount has been offered for tax, it is also held that the same represented deductible expenditure. However, if it is found that the balance amount has not been offered for tax in the subsequent year, then, the allowance shall be restricted to Rs.11,67,210/-

8.3. In the result, this ground is also dismissed, as discussed above.’

5. Ground of appeal mp/2: relates to the legality and validity of issuing notice under Section 148 and subsequent passing of the assessment order under Section 147 read with s.143(3) of the Income Tax Act, 1961, is not being adjudicated as the appeal has already been decided on merits of the case, Accordingly, this ground is treated as dismissed.”

4. Both parties agreed that the issue is covered in favour of the assessee and against the Revenue by the decision of this Bench of the Tribunal cited by the Commissioner of Income Tax (Appeals) whose order is extracted above. In view of the same, we dismiss both the appeals of the Revenue.

5. In the result both the appeals of the Revenue are dismissed.

Order pronounced in the Open Court on 29th August, 2012.

Sd/- Sd/-

(A.D. JAIN) (J.SUDHAKAR REDDY)

JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: the 29th August, 2012

*manga

Copy of the Order forwarded to:

1. Appellant;

2. Respondent;

3. CIT;

4. CIT (A);

5. DR;

6. Guard File

By Order

Dy. Registrar

1. Date of Dictation: 06/8

2. Draft placed before the Author on: 27/8

3. Draft proposed and placed before Second Member on: 28/8

4. Draft discussed/approved by the Second Member on: 28/8

5. Approved draft came to Sr.P.S. on: 29/8

6. Date of Pronouncement: 29/8

7. File sent to Bench Clerk on: 30/8

8. Date on which file given to Head Clerk on:

9. Date of dispatching the Order on: